The May labour market report came as a cold shower. Non-farm payrolls grew by a very limited 38k, the smallest gain in six years. Even if part of the slowdown (from 123k in April, downward revised from a preliminary 160k) was due to strikes in the telecommunication, the slowdown is beyond that: the net effect from strikes was probably around -35k. On top of that, after a promising rise, the labour participation ratio fell back quite markedly
(from 63.0% in March to 62.6%). Hence, the unemployment rate coming down to 4.7% is not necessarily good news, as being due to workers leaving the labour force. Additional worrying news comes from an increase in the share of involuntary part-timers. In short, the level of underemployment, after almost constant improvement over the last years, deteriorated in May, helping understanding the sluggishness of wages, which decelerated to 2.4%. Even if one point does not make a trend, the Fed will quite certainly not raise rates on June 15th. On Monday, Janet Yellen will speak in Philadelphia. We will have to listen carefully for her analysis of what definitely is a deterioration of the labour market conditions.